Disney Unveils Revamped Store at South Coast
Hoping to pump life into its listless retail division, Walt Disney Co. on Wednesday unveiled a redesigned Disney Store at South Coast Plaza packed with stuffed animals, signature baby clothes, Mickey Mouse toasters and an array of other products aimed at turning browsers into buyers.
If the redesign suits customers, the entertainment giant plans to overhaul about 350 of its Disney Stores in North America. But it also plans to close at least 100 stores worldwide over the next few years.
Although the stores have always attracted plenty of potential customers, too many in recent years have been content to window shop without making a purchase.
Under the new concept, Disney has shelved space-taking displays of Dumbo, Goofy, Donald Duck and Alice in Wonderland to carve out more space for merchandise. It has also installed computers so customers can buy products that aren’t in the stores--and Disney theme park tickets.
“It was time for us to change,” said Thomas Park, executive vice president of Disney Stores Worldwide.
Sales from Disney Stores represent a small fraction of the Burbank-based company’s overall revenues, but it is a highly visible part of Disney’s consumer products division that is considered one of the company’s lackluster performers.
First Union Securities Inc., which has a buy rating on Disney stock, said in a recent report that the company’s consumer products division’s operating income has “fallen off a cliff” in the past two years.
In the latest fiscal quarter that ended June 30, revenue from the division fell 11% to $511 million, including a $56-million drop in revenue from licensing Disney toys, clothes and other products, and an $8-million decline at Disney Stores.
The ambitious retooling effort comes as theme stores in general have taken their lumps. Some analysts chalk up the slump as simply the passing of a fad.
Indeed, Disney has closed its two ESPN stores, which sold sports-related merchandise. Viacom Inc. has closed the handful of Nickelodeon stores that it opened several years ago.
But Disney Store executives seem optimistic that the redesigned stores will reignite sales.
First Union also expressed cautious optimism about the future of Disney’s consumer products division, which includes Disney Stores, predicting that revenue should show growth in the “modest single digits” in the next fiscal year.
The division receives 70% of its revenue from licensing, 24% from publishing and interactive games, and 6% from the Disney Stores, First Union said.
The customers who shoved into the new store Wednesday were quick to notice the differences between the older, darker Disney Store next door, which closed as the new store opened, and the bright, new prototype featuring a wall of TV screens showing clips of Disney movies and promoting its products.
“I kind of liked the ambience of the other store,” said Julie Pearce, a 32-year-old Garden Grove resident. “But they’ve definitely got more products in here.”
Generally, analysts favored the concept, which they say could slowly help improve sales. To gain more control over its brand, Disney cut by half the number of companies that are licensing its products.
Currently, there are about 740 Disney Stores worldwide.
Disney has expanded some product categories at its new store, enlarging its selection of baby apparel and offering new household items, such as a $79 toaster that plays “It’s a Small World” and makes toast with an imprint of Mickey Mouse. It also intends to begin using more Disney characters on its products to take the pressure off the Mickey Mouse and Winnie-the-Pooh characters that drive much of the stores’ sales.
To help spur sales during the critical holiday shopping season, the company for the first time will conduct a television advertising campaign pegged to the stores. The campaign will feed off of Disney’s upcoming movie “102 Dalmatians,” while suggesting 102 reasons to shop in Disney stores.
The splashy grand opening at the Costa Mesa store left no doubt that Disney characters hold considerable appeal.
As velvet ropes limited the number of customers who could get into the new store at one time, hundreds of other men, women and children lined up in the mall’s walkways, waiting to have a picture snapped with Disney characters.
At least 200 people were in line ahead of Linda Jones, 34, and her sleeping 7-month-old, Sarah. But the Anaheim resident was determined that the baby would get her picture taken with Winnie-the-Pooh.
“By the time we get there, she’ll be awake,” Jones said.
A second prototype will open in coming weeks in Cherry Hill, N.J.
Analysts said the holiday shopping season will provide an important litmus test.
“We’ll know after we get through Christmas whether it works or not,” said Tom Wolzien, an analyst with Sanford C. Bernstein.
Disney’s stock closed Wednesday at $39.88, up 56 cents a share, on the New York Stock Exchange.
Bloomberg News contributed to this report.
